Unchained - Why the Mt. Gox Repayments May Not Hurt the Bitcoin Price Much - Ep. 666

Episode Date: June 28, 2024

Ten and a half years after filing for bankruptcy, Mt. Gox is finally set to disburse 142,000 Bitcoin worth nearly $9 billion to creditors between July and October.  Market concern has been growing over the potential impact on Bitcoin prices, but Alex Thorn, head of research at Galaxy, explains why only a small fraction of those bitcoins will be sold. He also discusses the implications of this redistribution on the market, the potential success of Ethereum ETFs, and the chances of a Solana ETF approval. Show highlights: 00:00 Intro 02:04 Why Alex estimates the amount of bitcoins that creditors sell will be a tiny fraction of the 142,000 to be repaid  13:35 What market shocks could arise from Mt. Gox creditors receiving billions in Bitcoin, and why he believes Bitcoin Cash is the real wild card 18:18 Whether Ethereum ETFs could be as successful as Bitcoin ETFs in attracting investors 23:06 Whether potential outflows from Grayscale's Ethereum Trust will dampen the excitement around Ethereum ETFs 25:07 How the combination of Mt. Gox repayments, Ethereum ETFs, and German and American government Bitcoin sales might affect crypto prices 27:32 The chances the SEC approves a spot Solana ETF Visit our website for breaking news, analysis, op-eds, articles to learn about crypto, and much more: unchainedcrypto.com Thank you to our sponsors! iTrustCapital Polkadot Guest Alex Thorn, head of research at Galaxy Previous appearance on Unchained: How Much Money Will Flow Into Bitcoin ETFs? Here’s One Projection Links Mt. Gox. Unchained: Crypto Market Sees $300 Million Liquidated as Bitcoin Briefly Drops Below $59,000 CoinDesk: Mt. Gox to Begin Repayments in July Governments selling: Unchained: US Government Sends $241 Million in Bitcoin to Coinbase: Arkham Cointelegraph: German gov’t offloads 900 Bitcoin, 400 BTC sent to Coinbase and Kraken Solana ETF Reuters: Investment manager VanEck files to list first spot Solana ETF in US | Learn more about your ad choices. Visit megaphone.fm/adchoices

Who are the individuals that are getting the 64,000 Bitcoin in our thing? Now, we don't know, right? I mean, this is the big question. And keep in mind, like, if the distribution agents are BitGo, Cracken, and BitStamp, BitCo is really institutional only. So I assume that's probably where, like, the funds or maybe businesses that have claims are going to receive. Most of the individuals are probably getting this delivered directly into a trading-capable Cracken or BitStamp account. So if you want to sell upon receipt, it's going to be pretty easy, right?

Like, I think it's just like push a button. It should show up, like, right into a crack and or BitStamp trading account. So the game here to determine how much of that 65 are obviously to come up with an estimate, right? We don't know, right? This is all sort of assumptions based and there's research behind it. But the question is, what is the nature of these people? Like, I can tell you one thing, they were early bitcoinsers, right? Mount Cox declared bankruptcy in 2014.

So these are people that owned or moved into Mount Cox custody Bitcoin 10 years ago, right? So we know they're early Bitcoiners. Now, I don't know, I don't know that many people who really like Bitcoin that eventually start not liking it. Most likely they're still really into Bitcoin. Hi, everyone. Welcome to Unchained. You're a no high resource for all things crypto. I'm your host, Laura Shin, author of The Cryptopians.

I started covering crypto nine years ago. and as a senior editor at Forbes was the first major meter porter to cover cryptocurrency full-time. This is the June 28th, 2024 episode of Unchained. Pocodod is the original and leading layer zero blockchain with over 2,000-plus developers, and the Pocodot 2.0 upgrade will be a massive accelerator for the ecosystem. Join the community at Pogo dot.network slash ecosystem slash community. With I trust capital, you can buy and sell crypto in a tax-advantage retirement account. Enjoy significant tax advantages, 24-7 access, and the industry's lowest fees.

Today's guest is Alex Thorne, head of Research at Galaxy. Welcome, Alex. Yeah, hey, Laura, thanks for having me back. Ten and a half years after it initially filed for bankruptcy, Mount Cox is finally going to be making disbursements to creditors starting in July, up through October. A total of 142,000 bitcoins worth a little under $9 billion are meant to be repaid. And there's been consternation in the markets about this, some concern that this will cause the Bitcoin price to drop. But you have said it's unlikely that all these Bitcoins will make their way to creditors to be sold. So what do you expect to happen? Yeah, it has been a long time. What a long road.

And I mean, honestly, this was a huge deal. This is probably the first, you know, FTX, I would say, right? And I'm just chuckling too, because last time I was on your show, you were also simultaneously covering Sam Bickman-Fried's trial. And so this kind of feels like the first. And the first, you know, major blowup really in crypto. I think there were other smaller exchanges. In fact, one of these poor other smaller exchanges, Bitcoinica blew up before Gox and then recovered some of their coins and they put it in Mount Cox for safekeeping. And then that got like, so that's that's in this report that we wrote about this. So yeah, when I think about the coins, right, we'll call it about 142,000 coins that have been recovered. I believe it's about a 15% recovery of what was lost,

right or 142,000 coins set to be delivered, right, in general that they have in their possession to be returned to creditors. And this has been so hard for people to follow because, first of all, it's a foreign nation's bankruptcy process. Bankruptcy is complicated enough, right? In the U.S. Imagine it's in Japanese, you know, there's different legal customs and norms that people don't know about, right? They're also notoriously private. So there's been this long road. And And ultimately what's going to happen is that creditors have been over time. They've had to provide an account at BitGo, Cracken, or BitStamp, through which they will eventually receive these coins, right?

And they also have Bitcoin Cash because the estate was able to recover, not recover, right, recover the fork from 2017 of Bitcoin Cash, right? They held the keys for Bitcoin, the time of the fork. So you have effectively equal amounts of units of these two assets. And we've been waiting for the last few years. they've been doing this process of contacting all of these thousands and thousands of individual creditors all around the world and like, I mean, probably over 100 jurisdictions and getting them to get these accounts set up at the approved distribution venues. Then even more recently,

they did a whole thing now a big reconciliation process with those distribution venues to make sure, okay, we were told by creditor, they have an account with you, do they have an account as the account ready, is it in good standing, blah, blah, blah, blah, blah. I'm told that's all complete. that reconciliation, right? And then I wrote a note about this to Galaxy clients and counterparties on May 13th saying that I expected, because basically all of this was complete, it should happen soon. I said as soon as May or June, and of course, a week or two ago, the estate said they will begin in July these distributions. Now, to your question directly, how much is set to be delivered? Well, I said there's about 142,000 coins total. But in order to get this quote unquote early payout,

and I'm laughing because it's been 10 years, you had to take a haircut. And our understanding is the haircut is about 11%, 10 or 11%, meaning you get 10 or 11% left. But that's not so bad, 90% of what you would otherwise get. Or if you want to hold out, you can hold out for an unknown amount of time. Potentially, we think maybe even three to five years

to see if they can recover your full claim amount, right? And this is in-kind. So we're talking about the Bitcoins. We're not talking about a cash value, you know, the way some bankruptcies end up having to do recoveries. So we start with that number, 142,000. We say, okay, well, there's a haircut. So we'll take it down to, we'll say 75% is our, again, our guess.

We talked to a lot of people. How many people chose that haircut, right? So we're trying to figure out how much of that 142,000 is set to be delivered in the near term. And so we say, okay, there's a haircut. And there's not 100% probably said yes, but we think it's about 75%. So now that says you have 106,000. coins that are at issue, right? If you do the 75%, and then if you do the 10 or 11% discount, now you have 94,600 coins that are at issue. And then we are now trying to figure out who

holds those coins, right? Like, what is the character, nature, breakdown, makeup of the, of the receiving people or entities? Well, we think about 20,000 coins are held in these Gok's claims funds, right? One of the things that happened over this long, period of time. It happened in FTCX. It happens in a lot of bankruptcies is some investors raise money and go around and offer to buy the bankruptcy claims from the creditors, right? They say, look, you know, who knows how much you're going to get whenever that what XYZ bankruptcy is resolved. You could sell your claim to us at some market clearing price, right? So let's say it's whatever the market is supporting for that price. It's, you know, based on the likelihood of a recovery or a recovery of

X, Y, Z amount. Right? So you might say, Let's say you're owed $100,000 in a bankruptcy, but, you know, the market is offering that the claims market is offering you $50,000 for that claim, right? Obviously, someone on the other side of that is betting that they can pay you 50, but eventually collect more. But maybe you want that liquidity. You don't want to sit around for 10 years waiting for Japanese bankruptcy court to figure out what happened to Magic the Gathering Online Exchange, which is like, right? Maybe you don't want to wait for that. So a lot of people did sell their claims, and we think about 20,000 of the Bitcoin is held in these funds. Okay, so let's set that aside for a second, right?

So now we're down to 74,000 coins. There's also this poor exchange that I mentioned, Bitcoinica that has about 10,000 coins. Now we're at 64,000 coins that are remaining as we remove these, right? So I think about 64,000 Bitcoin is set to be delivered to 20,000 individual people, right? That's when we do all that hair cutting that I just described. So for a couple of reasons, I don't think the credit funds, the claims funds are likely to be big sources of selling. My understanding in talking to some of them is that they all plan to deliver in kind to their LPs. So their LPs are going to get the Bitcoin. They're not going to sell the Bitcoin they get and give back cash. And then you start to wonder who are the LPs, right? What if they sell? This is the line of thinking. And we think that again, in talking to some of some big LPs in these funds as well as some of the funds, that these LP bases are mostly comprised, almost entirely comprised of high net worth Bitcoiners. who effectively want Bitcoin at a discount.

Now, obviously, some are always going to sell from any of the cohorts I mentioned. But again, in doing some diligence on this, like, we're pretty sure this is actually like kind of diamond-handed people who wanted to stack at a discount. Bitcoinica can't sell theirs right away, even because now they're going to have to go through their own bankruptcy process in New Zealand. So those may get sold for all we know that's going to be a cash denominated bankruptcy like some of the ones in the U.S. are. I don't even know. but either way, it's not getting sold right now. So now the 64,000. Who are the individuals that are getting the 64,000 Bitcoin in our thing?

Now, we don't know, right? I mean, this is the big question. And keep in mind, like, if the distribution agents are BitGo, Cracken, and BitStamp, Bitcoin is really institutional only. So I assume that's probably where like the funds or maybe businesses that have claims are going to receive. Most of the individuals are probably getting this delivered directly, into a trading capable cracken or BitStamp account. So if you want to sell upon receipt,

it's going to be pretty easy, right? Like, I think it's just like push a button. It should show up, like, right into a crackin or BitStamp trading account. So the game here to determine how much of that 65 are obviously to come up with an estimate, right? We don't know, right? This is all sort of assumptions based and there's research behind it. But the question is, what is the nature of these people? Like, I can tell you one thing.

They were early bitcoins, right? Mount Cox declared bankruptcy in 2014. So these are people that owned or moved into Mount Gawkes Custody Bitcoin 10 years ago, right? So we know they're early Bitcoiners. Now, I don't know. I don't know that many people who really like Bitcoin that eventually start not liking it. Most likely they're still really into Bitcoin. In general, I would say in general, that means they probably want their Bitcoin, but

start to lean in that direction, right? A more modern new exchange, like even FTX, which drew in a lot of like newer entrance and retail. I would bet that the FTCS creditor base, just broadly speaking, is not as diehard Bitcoin or as the Mount Gawks creditor base, just on balance, right? For sure. Yeah, that's one thing that goes into the idea that maybe they're going to huddle rather than sell. The other idea is that the claims funds, they spent years making repeated and in some cases aggressive and competitive offers to buy these claims. And these people said no.

They waited 10 years, right? You had an opportunity. I mean, some of these funds have been around for five years, right? Like, it's not like they only offered in 2017 when Bitcoin was $1,000, right? There were offers being bought and sold like at the highs of 2021. So people had an opportunity to get out like with decent prices, even relative to where Bitcoin prices now, right? And yet they resisted. A lot of these remainders did resist.

So again, that puts me to think that these are more likely to be diamond-handed Bitcoin. types, right? There's also a major tax consequence if they sell, right? Because effectively, this is an asset that even with the fact that it's only about a 15 or 16 percent recovery, this is like a 150x, I think. When when Gox went bankrupt, the price of Bitcoin dollarized was $451. Right? So they're getting these coins, if we assume it's today, I know Bitcoin's what, like 61-5 today. When I wrote this report last month, it was 63-5. But, I mean, that's an enormous gain that they will have to take, right?

I don't know because I'm not an expert in, you know, maybe they can claim a tax loss also on the other part. I'm not really sure. Maybe they already have. But most likely there's a significant capital gain tax if you do sell, whereas if you hold in kind, you don't. So in general, I don't think there will be a lot of selling. That's what this all boils down to. Or at least I should say there, I don't. I think that there will be much less selling than like a naive look at the headline suggests.

Yeah, yeah, I think this analysis is so smart. So in a moment, we're going to talk about what that means then for the price, but first a quick word from the sponsors who make this show possible. Pocodot is the original and largest layer zero blockchain with over 2,000 plus developers. The anticipated Pocodot 2.0 upgrade will be a massive accelerator for the ecosystem. upgrading the infrastructure with eight times higher transaction throughput and twice as fast block times, tailored core time for the needs of every protocol, trustless bridges to multiple chains, and revise tokenomics with a token burn to reduce inflation.

Perfect for GameFi and Defi to build, grow, and scale. Get your Web3 ideas to market fast. Think big, build bigger with Pocod. Join the community at Pocodot.network slash ecosystem slash community. Back to my conversation with Alex. So given all of that, you know, how unlikely it is that this cohort that's going to receive the Bitcoins is likely to sell. Like, what do you expect to see happen with the Bitcoin price? Yeah, I think at a high level, I expect it to be less impactful than many expect.

That being said, you are going to see at some point a huge amount of coins get transferred out of these wallets and sent to exchanges. And I think that could definitely spook the market. And by the way, there will be some selling, right? We're not saying there's no selling. I'm saying quite broadly that the alpha in this analysis, if there is any, is that I'm saying it'll be less than expected, right? So, you know, I don't know. I think if we use some naive assumptions, you know, if we say 10% of the 65,000 is sold, that's still 6,500 coins that could be dumped on the market. And again, because the average creditor of the 20,000 has, what, three point something Bitcoin coming back to them. There's plenty of retail size.

Now, of course, that's not the median, right? Like, there's probably a power law distribution here where some people actually have a lot of Bitcoin. But in general, a lot of like sort of regular folks, yes, they were early, are going to be able to sell this. They're going to be able to click sell in a crack under pit stamp account. Like, it's not going to be operationally difficult to sell, right, if you choose to. So even in 65. And so these are likely to be market sales, right? You're like, eh, I wanted my money back.

I got it. I'm just going to sell this for dollars, right? You might decide. 6,500 Bitcoin being dumped on a market sale, sort of right around the same time. That can have an impact. I mean, that's not a small sale. But again, Bitcoin's pretty liquid, right? I mean, it's trading $10 to $20 billion a day on spot exchanges over the last, you know.

So, you know, 6,500, it's not. a huge dent. So I think there's, you know, I think it's, you know, something. It's an event. I do think the event is scarier than it is an actual liquidity sell event, in my view. The other question people have is when are the coins actually going to be delivered? And like I talked a little bit about that before, about our view on timing, but now they say they will start in July. Now we don't know what date. And also humorously, then they said this too when they were seen moving coins on chain at late May, which turned out to be some kind of like operational like preparation for this distribution.

They end those statements the estate does with, but you'll have to wait for a while. That's what they say for a while. I don't know if the translation issue, but I'm like, you know, please, sirs, we've been waiting for 10 years, right? But also like, what does for a while mean? Some people think that they have between July when they say and the end of October, I think they are mandated by the court to do these distributions by the end of October. So some people think they'll be doing it in.

waves or it'll be done across that from a from a market impact standpoint sure that would be better but i just don't see the reason for that my understanding is it is in their discretion they just have to do it before the end of october but in my view i don't know why you would tell your creditors like hey you're going to get a third of it and then one month and then a third the next month and then a third if they don't have to do that and as far as i can see we can see the coin sitting in these wall it's like they have the coins i don't know why they would delay so i do expect it to get all delivered at once at some point we're told in july is what the current guidance from this estate is.

I think very obviously the damage to the market or the impact on the prices of these assets is likely to be much more significant and disruptive on the Bitcoin cash side. Bitcoin Cash has 166th the liquidity on centralized exchanges than Bitcoin does, but effectively the same number of units is being delivered. And also, not one single creditor of money. Mount Gox in their claim purchased Bitcoin Cash because it went bankrupt three years before Bitcoin Cash launched. So maybe there are some people that like Bitcoin Cash. There's, you know, no, I don't really make a judgment on that, but it's relative to liquidity. It's a significantly

larger amount of Bitcoin cash to be delivered and not one of these people put Bitcoin Cash on Mount Cox. Yeah, it would be interesting to know what somebody like Roger Veer would do. Yeah, and he is, and I haven't gone through all of the Gokx. ones, but he is notably a creditor in Bitcoinica. So he has Bitcoinica. Roger does. Bitcoinica, Bitcoin is stuck in Mount Cox, right? I think 500 plus Bitcoin. So you assume that that's also 500 plus BCH. Yeah. Yeah. It's interesting. It would just be interesting to ask him because obviously he's been more aligned with Bitcoin cash, but the value of that hasn't been good. So one other thing that is kind of curious, because it's happening around the same time, is

So we'll have these bitcoins that people will be receiving potentially that will cause a little bit of a sell-off. But then at the same time, we've got the ether ETFs that are going to be launching. So let's just focus on the ether ETFs. Then we'll circle back to see how that can impact the Bitcoin price. But what do you expect to see in terms of inflows with the ether ETFs? Yeah, I think a lot of people are pessimistic relative to the Bitcoin ETF inflows. You see that, right? That's all over Twitter.

many analysts have put out stuff. I think it's possible that they could perform better than expected in relation to inflows. And the reason I'll say this is because when we did our Bitcoin prediction for the inflows, we said $14.5 billion in year one takes us to about $75K. Now, that did happen. For a whole year, our inflows prediction will end up being well below, right? Because we got to 14.5 in five months. We got to 15 and five months, right? But it did take us to that price. So we were pretty good on the Bitcoin one. I think the question now is where we weren't good is that entire methodology that we did was basically saying that would be driven by financial advisors because they were the cohort that doesn't have like easy access to put either themselves or

their end clients into Bitcoin exposure. So like these products are particularly for them. Well, we got there without them. Basically, they're not really here. Some are here. Some independent RAs, but none of the big platforms are offering the Bitcoin ETFs on a solicited basis yet, right? So thinking about that has me thinking, you know what? Like maybe our view, if you looked at the 13F filings for the Bitcoin ETFs, it was about 80% non-filers, meaning not investment advisors or investment managers with 100 million or more in assets. So who bought the Bitcoin ETF? We think a lot of retail people bought it at like brokerage platforms like Fidelity or Schwab or TD or e-trade in their tax advantage accounts like IRAs or 401Ks through brokerage windows.

There's a fairly large amount of money in those, right? And there's millennials who both like crypto on a pretty high percentage basis, but have also been working for 15 years, 15 or 20 years even, right? There's a fairly large amount of retail capital that I could see buying these. Similarly to the way they drove a lot of the inflows into the Bitcoin ETA. So now we came out, we said, what would it look like if the ETH ETF saw 30% of the Bitcoin flows? That would be about $1 billion per month, $5 billion in net inflows in the first five months. That does put us kind of on the high end of where people are estimating.

You know, I don't have a ton of conviction. We're not saying like that's what we expect, but I think I'm really trying to learn the lesson of not kind of overthinking this. You know, I feel like it's kind of like a mid-curve, left-curve, right-curve meme where it's like there's tons of reasons why these are long. launching into a different market than the Bitcoin ones did. They don't have staking, which is irrelevant to Bitcoin, but is a material like dilution if you hold ETH in size without staking. There's a whole bunch of reasons why it might not be good. We agree with those.

And we published this report. We lay those out. But on the other hand, it's kind of like, well, you know, that 30% is derived from the ratio of a variety of Bitcoin exposure products to similar ETH exposure. product. So like open interest on CME futures for Bitcoin versus ETH, right? The BTC to ETH ratio is 2.92. Right. So there's 8.5x more CME futures, Bitcoin than ETH, but also keep in mind that APs use in the Bitcoin ETFs use the CME futures to hedge and stuff. But if you look at open interest across all exchanges, it's only 2x bigger on Bitcoin. If you look at 30 day volume, it's only 4x bigger on Bitcoin.

If we look at the trusts like, you know, GBDC or E-P pre-approval, GBDC was only 2.5x bigger, right? So we're kind of using this as sort of our guidepost for what the flows might be. And knowing that that still puts us high, like we see the pessimism, right? This was a quick pivot or something it seems like from the SEC. So there hasn't been marketing done. We didn't even, we wrote this report for the Bitcoin ETFs three and a half months before they launched. We only just released the report today for ETH, right? We didn't think it was going to happen.

It's not a three or four month drumbeat of positive news like Bitcoin was, right? No staking, like I said. It's the summer. It's a low volume trading time in general. Plenty of reasons why they might not see a proportionate amount of investment. But our idea is, what if they do? Well, one question for the numbers that you cited. Does that include potential outflows from ETHE, the gray scale?

Ethereum trust? Yeah. So the $5 billion in the first five months is net inflows. So we do, yes, we have an estimate of E-Phee coming out. You know, let me see where we can find this on the thing. But yes, it includes those. It's inclusive of those. We're saying $1 billion theoretically per month of net inflows.

And that's when we say net, we're effectively saying net of E-thi, right? It will be a drag. There's no doubt. Yeah, unless they do something with their fees that, yeah. That's the other thing. That's a great point. we don't have that much clarity on fees. So you're totally right.

I mean, it's a hard, that's hard to note. We haven't really gotten, even when Michael Sonnonshine was still at Grayskill, which he's not. I mean, he was pretty coy with, you know, they said we might change our GBTC fees at some point, right? But, I mean, and some people look at this, the fact that they kept them at, you know, 1.5% for GBDC after it converted to an ETP and say, like, what a huge mistake. they saw half their AUM outflow. Well, Bitcoin also like doubled or so during that time. So actually in their taller fee revenue, I think they stayed the same, right? So I don't know what the strategy is. I agree. They also, I think, have an application for what's called like a mini ETF, which is just like another ETH ETF that would have a lower fee. I don't know,

but that isn't in this batch, I think, to be approved. So I'm not sure, but you're right. The fee will be a big determinant on the outflows. Yeah, I saw a theory on Twitter. I don't remember who said this, but they suggested that maybe if Grayskill wanted to stem the outflows, then they could offer to do a fee waiver for some period and wait until their mini-ETF launched. Yeah, they could. I mean, a lot of the others, I think they're like the only Bitcoin ETF that didn't do a fee waiver. Basically, everybody did like a six-month zero fee, pretty much. I don't know if literally everybody, right? So you're right. They could do that. Yeah. Yeah. Okay. Well, so now let's circle back to the Mount Gox thing. So when you look at potential interests in Ether ETFs and we're seeing like a little bit of maybe selling from the Mount Gox for payments, like then when you put those two together, what do you think might happen to the price of Bitcoin?

And also you have the German government selling some Bitcoin, the U.S. government was selling some Bitcoin too. And yeah, I mean, I, you know, very hard to predict. I would say just generally for the other. other than this Ethereum ETF, which I think could either be really good or actually kind of damaging to near-term eth-USD price, depending on how good or bad the net demand is, right? I think it's basically that in the election that I'm looking at as the major catalyst for crypto and not much else, right, at the moment. You could have some geopolitics or macro stuff that in particular impacts Bitcoin positive or negative, right? Like rate cut or a new nation state has bad inflation or decides to. adopt crypto. I mean, there's stuff like that. But in general, I would say very tough to take a strong directional view for me on this market between now and November. So a lot could

change for the positive or stay the same, and particularly on the regulatory side, depending on the outcomes of the elections. Again, almost not, it may not even matter who wins. I think like there could be changes regardless for all we know. Hard to see past that for me. And so I don't think the Gok selling really can be that much. I mean, this is a pretty big market in Bitcoin in general. I'm saying even if all 100, I mean, the problem is that I think people really weren't aware that it's not literally 142,000 Bitcoin about to be sold. All the headlines are like Gok's set to distribute $9 billion, 142K of BTC, right? I just think there's some more nuance to that. And it could be as small as 5,000 Bitcoin, 10,000 Bitcoin that's ultimately sold or sold immediately. And so, and then ether, yeah, I mean, this is, I don't know, it's tricky.

I mean, you could, it would be reasonable to say that ETH BTC ratio should tilt further in favor of ETH now, which maybe it has bottomed from a month or two ago when it was like well below 0.05. That because if the ETH, ETHC proportionate demand to the Bitcoin ones, like I said, but also Bitcoin has sort of idiosyncratic unique cell pressure, you could see that ratio tilt back in East's favor a bit. It's possible. All right. So last quick question, the day that we're recording, news broke that Vanek had applied for a spot SOTSOLA ETF, SELANA ETF. Obviously, you know, Galaxy is an issuer of a spot Bitcoin ETF and will soon be an issuer for a spot ETHER ETF. So I don't know what your thoughts are on the prospects for that. I mean, I think we very clearly have said on Galaxy research that we do view Solana as the third chain.

So it doesn't surprise me that there could be demand for this product. and the Bitcoin ETFs have garnered significant assets and interest. So similar, I mean, whether or not the ETH ones are great right out the gate or not, I think over time, the Ethereum ETFs will also be pretty widely held. So I can see why you think maybe Solana may be the next one to do if you're Vannek or anyone else, right? I think to their credit, Vennick, they've also been very frequently like the first to file these things. So maybe they're reading the tea leaves, thinking that maybe the regulatory, you know, wins could change in their favor. And then they'll have the first one that's in, you know, pending to be reviewed and or approved or denied.

At the sort of underlying court question, like, and I think the reason why people are wondering, right, the SEC is specifically currently alleging that Solana itself is an unregistered security in their, right, in their case against Coinbase. So given that, it seems difficult to understand or believe that the SEC would approve a commodity-based trust, which is what these ETFs are, that holds something that they are alleging in court currently is an unregistered security. And then the other sort of big point, which Van Ex had of research addressed on Twitter directly, but I'm not sure is really apt or applicable for debate, is the pathway has been. first you get spot feet you get futures then maybe you get a futures ETF then actually you get ETFs in Canada both and then you get spot ETFs in the US literally both Bitcoin and Heath will have gone through that exact thing now to be fair like that is arbitrary it's not exactly clear that that's how it has to be done but that's how this SEC has ultimately handled these two Solana doesn't have listed futures on on a US exchange there's no Solana futures

ETF. There's no Canadian Solana publicly traded spot Solana ETF. So this would be different precedent, right? And the question, the reason this, I don't, again, I don't know that this should be the pathway. It's just kind of what the SEC made the pathway, because they said that there needs to be a regulated market of sufficient size with surveillance sharing agreements. And there was a whole dispute about whether that had to be, did that mean that every crypto exchange, like spot crypto exchange had to have a surveillance agreement with each other? Or eventually, one of the main things the D.C. Circuit Court of Appeals ruled in the gray scale case was that, no, the CME futures are a sufficiently large and regulated market and the surveillance there because of the correlation between the spot prices and the futures prices on CME, surveilling that was sufficient, right? That's effectively what tied the SEC's hands because that was pretty much the only argument they'd made in all the prior denials as to why they were denying, right? So it just so happens that the precedent we do have does basically require that. Now, Vaneck is saying on Twitter that there isn't a need for that. You could put a surveillance sharing agreement on Coinbase and call that sufficient size and move forward. That's true, but there's no precedent for that, whereas there's plenty of precedent for this other thing. So I would say absent a change in SEC posture or perhaps even leadership, this is very unlikely to be approved.

Yeah, I just Googled, you know, 240 days from today. And it turns out it's February 22nd, 2025, which is roughly a month after the inauguration. So potentially, yeah, it's maybe them thinking that we'll see a new president and maybe a new head of the SEC by then. Yeah, not a bad bet, though. And also, I don't think they really, to be clear, I don't think you, like, lose that much or anything by filing. Like, right? I mean, that's why I sort of say all power to them. They've been, they've been pretty aggressive with being one of the first to file on.

several of these. So, you know, I'm, you know, I'm for it. I think one of the main things we need, by the way, whether it's from the regulators or a new legislation, the Fit 21 Act, other stuff addresses this, is clear delineation between what is a digital commodity and what is a digital security. If you got that, maybe this would be resolved this question. Yes. A sentiment heard throughout the industry for quite a while. All right, Alex, well, this has been amazing. Thank you so much for coming on and changed. Yep. Thank you, Laura. Don't forget. Next up is the weekly news recap. today presented by Wondercraft AI. Stick around for this week in crypto after this short break. Did you know Unchained is much more than a podcast? Last year, we unveiled a completely redesigned website

enriching your experience for the latest news, insightful analysis, compelling op-eds, and comprehensive learning articles and guides for beginners. Explore all this and more at unchained crypto.com. Did you know you can buy and sell crypto with tax benefits in an individual retirement account or IRA? I trust capital makes this possible. But what does this this mean? When you buy crypto outside an IRA, like on an exchange, you face taxes on gains. But in a Roth IRA, gains would be tax-free. I-Trust Capital also has the lowest fees in the industry and 24-7 accessibility. Start now and maximize your retirement savings with I-Trust Capital. Welcome to this week's Crypto Roundup. In today's recap, we cover Vanex new Salana ETF filing

and its fee waiver for the Ethereum ETF, Coinbase's lawsuits, against the SEC and FDIC and the latest updates on FTX's reorganization plan. We'll also discuss Julian Assange's release, funded by crypto donations, blasts major air drop, and the new tools unveiled by the Salana Foundation. Additionally, we'll touch on the increased bounty for the crypto queen, Ruja Ignatova, and Ripple CEO Brad Garlinghouse's criticism of SEC Chair Gary Gensler. Thanks for tuning in to the weekly news recap. Let's begin.

VANEC files for Solana ETF declaring Sola Commodity. Investment manager Vannick filed for a spot Salana Exchange traded fund in the U.S. This follows the SEC's approval of spot ETFs for Bitcoin and Ethereum. If approved, Vanex proposed Solana trust would be listed on the Sibo BZX Exchange and would value its shares based on the market vector Solana benchmark rate. Matthew Siegel, head of digital assets research at Vannock, announced the filing on Thursday. claiming that Saul functions similarly to Bitcoin and Ethereum, thus categorizing it as a commodity. This contrast with the SEC's stance, which has previously classified Saul as a security in enforcement

actions. Vanek waives fees on Ethereum ETF as SEC approval nears. Vanek didn't stop with Solana this week. The investment firm also plans to waive fees on its proposed spot Ethereum ETF until 2025 or until the fund's assets under management reach 1.5 billion dollars. Vanex Siegel said the strategy aims to establish the firm as a leader in crypto-etf fees and drive investor interest into Ethereum. He highlighted the potential for increased decentralized finance activity to boost ether prices, which will also benefit Vanex holdings. The SEC could approve several spot ether ETFs, including Vanek's, as soon as July 4th, according to readers. Discussions are in their final stages, with only minor issues

left to resolve. Meanwhile, Ethereum entered its longest inflationary period since the merge, with its circulating supply increasing steadily for over 70 days. Coinbase sues the SEC and FDIC for regulatory information. On Thursday, Coinbase, the largest U.S. crypto exchange, filed lawsuits against the Securities and Exchange Commission and the FDIC for failing to comply with Freedom of Information Act requests. These lawsuits filed in Washington, D.C., filed in Washington, D.C., seek to obtain documents about the agency's approaches to crypto regulation. Coinbase alleges that regulators, including the SEC and FDIC, have deliberately pressured banks to deny crypto firms access to the federal banking system.

The lawsuits aim to reveal the SEC's internal stance on Ethereum and the FDIC's pause letters, which instructed banks to halt crypto-related activities. Coinbase's actions reflect growing tensions between the crypto industry and federal regulators over the transparency and fairness of regulatory practices. FTX to poll creditors on reorganization plan amid bankruptcy proceedings. FTX bankruptcy advisors will begin soliciting creditors for feedback on the CryptoExchanges Chapter 11 reorganization plan. During a bankruptcy hearing on Tuesday, where lawyers for both FTC and its creditors debated a disclosure statement, Judge John Dorsey gave FTC's advisors the

greenlight to solicit creditors to vote on the plan, despite some creditors opposing it and demanding payouts in cryptocurrencies, rather than the dollar value as proposed. Creditors have until August 16th to vote on the plan. Andrew Dieterick, who represents FTCS, highlighted the lack of major objections at the hearing, calling the plan largely consensual. Conversely, David Adler, who represents three creditors, criticized the disclosure statement as woefully inadequate, and raised concerns about significant tax implications if payouts are made in cash instead of crypto. Judge Dorsey is set to make his decision on whether to approve the plan on October 7th. Blast's AirDrop Goes Live, drawing attention to Linnea and

Scroll. Blast, an Ethereum Layer 2-scaling network, distributed 17 billion blast tokens in its eagerly awaited AirDrop. The distribution began on Wednesday, with over 35% of the tokens claimed within hours, according to Parsec Finance's blockchain explorer. This air drop comes as Blast hit an all-time high in daily transactions and active addresses. In a notable allocation, Blast also provided 3 billion Blast tokens to the Blur Foundation, enhancing their governance participation. Both protocols were founded by Tishun Rocair, also known as Pac-Man. As of now, Blast is trading at 2.4 cents, valuing theirdrop at approximately $400 million.

With the blast airdrop underway, attention is shifting to other Ethereum Layer 2 networks such as Linnea and Scroll. Both networks have seen increased activity and total value locked as users anticipate potential future airdrops. Linnea has grown by 15% in ether deposits over the past month, while Scroll's TVL has surged by 40%, indicating strong interest in these platforms. Julian Assange's released travel costs were funded by crypto donations. Julian Assange, the founder of WikiLeaks, has agreed to plead guilty to a charge of illegally obtaining and disclosing national security material, resulting in his release from a British prison. This plea deal, expected to end his long-standing legal battle with the U.S., involves Assange serving a sentence equivalent to his time already spent in detention. Asange's release travel expenses were nearly covered by a significant Bitcoin donation, an 8.07BT, or 4906,000. thousand dollars. Contribution quickly met most of the $520,000 needed for his charter flight to Australia.

Additional funds were raised through various cryptocurrencies and fiat donations. The Free Assange campaign stated, Julian's health is in dire need of recovery. We are launching an emergency appeal to seek donations to help him cover the flight debt and ensure his recovery and well-being upon his arrival. Every contribution counts. Solana Foundation unveils blinks. The Salana Foundation introduced innovative tools that can turn any website or app into a gateway for crypto transactions. The first tool, named Actions, enables users to perform on-chain transactions directly from websites, social media platforms, and even QR codes. Another tool, Blinks, short for blockchain links, converts these actions into shareable links, making any URL a starting point for transactions on the Salana blockchain. These tools aim to enhance mainstream adoption by integrating blockchain functionality into everyday

digital platforms. Initial testing and utilization will involve teams such as Cubic, Tensor, Jupiter, Helios, and several others. Despite potential risks of malicious links, the Salana Foundation assures users that only trusted partner domains are whitelisted, adding an extra layer of security to these new tools. FBI increases bounty for Crypto Queen, Ruji. Ignaatova to $5 million. The U.S. Department of State has raised the reward for information leading to the capture of

Ruja Ignatova, also known as the Crypto Queen, to $5 million. Ignatova, who vanished in 2017, was the mastermind behind One Coin, a fraudulent cryptocurrency scheme that defrauded investors of over $4 billion. Despite reports of her alleged murder, the FBI remains committed to finding her. One Coin, launched in 2014, was marketed as a revolutionary cryptocurrency, but was actually a Ponzi scheme. Ignatova disappeared after a U.S. warrant was issued for her arrest. The FBI suggests she may have altered her appearance or started using a false passport. Meanwhile, other One Coin associates have faced justice.

Co-founder Carl Sebastian Greenwood received a 20-year sentence, and legal chief, Arena Dilkinska, was sentenced to four years. The increased bounty aims to bring Ignatova to justice and provide closure to the victims of one coin's fraudulent activities. Ripple CEO criticizes SEC chair predicts political impact. Ripple CEO Brad Garlinghouse claimed that SEC chair Gary Gensler will cause President Joe Biden to lose the upcoming election. Garlinghouse's comments followed Gensler's remarks at the Bloomberg Invest summit, where Gensler highlighted significant noncompliance occurring in the crypto-indexempt

and the legal troubles of several prominent figures. Garlinghouse, responding on X, criticized Gensler for his stance and handling of past incidents such as the FTX collapse. He argued that Gensler's actions are detrimental to both the crypto industry and the Biden administration's political prospects. On this week's Tuesday episode of Unchained, crypto lawyer Sam Enzer called Gensler one of the most controversial chairs in recent history, cited. citing multiple missteps, including the SEC's misrepresentations to a judge in the debt box case, and Gensler's evasive responses to Congress about investigating Ether. Enzer questioned the Democrats' commitment to being pro-crypto and pro-innovation while keeping

Gensler in his position. And that's all. Thanks so much for joining us today. If you enjoyed this recap, go to unchained crypto.substack.com, that is unchainedcrypto.substack.com and sign up for our free newsletter so that you can stay up to date with the latest in crypto. Unchained is produced by Laura Shin with help from Matt Pilchard, Juan Aronovich, Megan Gavis, Pam Majumdar, and Margaret Korea. The weekly recap was written by Juan Aronovich and edited by Kari McMahon. Thanks for listening. Unchained is now a part of the Coin Desk Podcast Network. For the latest in digital

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